Capital Productivity

Capital Productivity 

output per unit of value of fixed production assets (fixed capital). In a socialist economy, capital productivity characterizes the efficiency with which fixed capital stock is used. It is commonly employed in economic analysis and in the formulation of production plans and plans for capital expenditures, both for the national economy as a whole and for individual sectors, production associations, and enterprises.

Data on the gross social product and on national income (from productive activities) are used in calculating capital productivity for the national economy as a whole; for calculating the productivity of individual sectors, data on gross (commodity) or net output are used. In sectors where the output is homogeneous (petroleum, coal, cement), physical units are sometimes used in the calculations. Capital productivity is calculated on the basis of the balance valuation of the fixed production assets (depreciation costs included), using either the average value over the year or the value as of the end of the year. Capital productivity is the reciprocal of the capital-output ratio.

Capital productivity differs from one branch of material production to another. Thus, the national income produced in current prices per ruble of fixed production assets in the USSR in 1975 amounted to 45 kopeks in the national economy as a whole, 50 kopeks in industry, 36 kopeks in agriculture, 13.4 kopeks in transport and communications, and 1.18 rubles in construction. Productivity is influenced by a number of factors. Its growth depends primarily on the level of technology, the organizational and technical measures employed in managing production capacities, and the proportion of capital investment earmarked for reconstruction and retooling.

Many factors act to lower productivity. For example, the accelerated development of industrial branches with relatively low capital productivities may lower productivity for industry as a whole. The expansion of production in the country’s eastern and northern regions has the same effect because the cost of fixed capital stock is between 30 and 50 percent higher there than in the European part of the USSR. Various purification facilities included in industrial projects which do not directly influence the volume of production nevertheless raise the total cost of the fixed capital stock, thereby lowering capital productivity. The working of mineral deposits at greater depths requires additional expenditures in fixed capital, again leading to lower productivity. The level of capital productivity and the pattern of changes in productivity depend in large measure on technical and economic indicators describing the utilization of machinery and equipment and especially on increases in the equipment shift index.

Capital productivity has fluctuated over the years because it is simultaneously influenced by a variety of factors. Thus, capital productivity in industry in the USSR rose through the 1950’s and declined between 1961 and 1965. During the eighth five-year plan (1966–70), productivity showed no change with regard to gross output but increased with regard to net output. During the ninth five-year plan, there was a slight decline (by 3 percent), caused primarily by construction programs launched in the country’s eastern and northern regions, by the deterioration of geological and mining conditions in the existing mineral deposits, and by difficulties encountered in supplying light industry and the food processing industry with agricultural raw materials because of extremely adverse weather conditions over a number of years. Improved use of fixed capital stock is reflected not only in higher capital productivity but also in higher labor productivity, lower production costs, and improved product quality. Thus, if outlays for additional fixed capital stock can be recouped in the period prescribed by norms, the investment is economically warranted even if capital productivity is slightly lowered. The raising of capital productivity leads to increased efficiency of production. Five-year plans make provision for better use of fixed capital stock and for the development and implementation of programs to raise capital productivity in various sectors of the national economy, at enterprises, and in organizations.

L. E. BABASHKIN